A consolidated tape providing real-time trading data from across the EU is urgently needed, but the European Commission’s proposal contains a “critical design flaw” in the form of minimum revenue targets, according to asset management industry group EFAMA.
A consolidated tape is an electronic system combining sales volume and price data from different exchanges. The US has had one since the late 1970s, and the UK is exploring developing a consolidated tape, especially for fixed income.
The creation of a consolidated tape in the EU is at the heart of proposed amendments to MiFIR and MiFID proposed in November as part of the Commission’s Capital Markets Union legislative package.
Commenting on the Commission’s MiFIR review this week, EFAMA said it supported many aspect of the proposal, including the provisions for real-time delivery of data, mandatory contributions by trading venues, voluntary consumption of the tape, a single provider model and a tape that encompasses multiple asset classes.
However, it had strong reservations about the charges associated with a consolidated tape, it said.
According to the industry association, the Commission’s proposal suggests a tender process will be set up so that the winning bidder for the Consolidated Data Provider (CTP) is the one that can guarantee the highest revenue amounts back to data contributors.
EFAMA said a consolidated tape, delivering raw data, should charge on the basis of reasonable cost, and that institutional investors should pay fees linked to the reasonable commercial basis as presented by the CTPs, while retail investors should have access to the tape for only a very small, symbolic fee.
The Commission’s proposal “turns this logic on its head,” it said, and the minimum revenue targets as defined in the EC proposal should be removed.
“We believe that smaller markets will see a net benefit from the additional visibility that the consolidated tape provides, but at the same time we understand that preferential treatment under the revenue scheme for smaller markets is required to sustain existing business models that have lower listing and trading volumes,” said Susan Yavari, regulatory policy adviser at EFAMA.
“But a blanket approach maximising the stock exchanges’ data revenues should not be a policy objective. Therefore, with the exception of smaller markets, all data contributors should be compensated for their data on a cost of production basis. That means the exchanges, as well as Multilateral and Organised Trading Facilities.”
She added: “This will establish a level playing field between trading venues, and provide a sound revenue model for the tape, unlike the current proposal where tape revenues are to be maximised to inexplicably subsidise the core activities of stock exchanges.”
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